A difficult market environment in 2019 had a significant impact on the operational activities of most of the world’s leading potash producers, including Uralkali. However, in the reporting period, the Company displayed good financial performance: EBITDA growth was 8% year-on-year, while EBITDA margin rose to 67%.
I would like to note that the weakening demand in the key export markets enabled the Company to focus on important comprehensive repairs at the Group’s production facilities. In 2019, Uralkali also paid great attention to enhancing corporate social responsibility.
As one of the largest entities in the Perm Region, the Company runs programmes aimed at developing the region and improving the quality of people’s lives. For example, in the reporting year, Uralkali initiated a project to support healthcare by providing medical facilities with modern equipment and attracting qualified health professionals to Berezniki and Solikamsk. The Company also continued its housing programme for employees. As part of the project, eight buildings with 730 apartments with a total area of around 49,000 square metres are under construction.
Uralkali Group seeks a transparent and mutually advantageous dialogue with all stakeholders; therefore, by the end of 2019, we expanded the set of published indicators related to the ESG methodology.
I am convinced that our efficient development strategy and the professionalism of our management and employees will continue to provide Uralkali with sustainable growth and maintain its leading position in the global potash industry.
I express gratitude to all employees of Uralkali for their great contribution to the Company’s development, and to our shareholders for their trust and support.
Uralkali, as one of the key players in the global potash industry, continues to be guided by best practices in business administration, corporate governance and corporate social responsibility.
In 2019, a relatively difficult situation was seen in the global potash market. Increased competition between major producers amid excess supply in almost all key sales markets, the absence of contracts for seaborne shipments to China for the second half of 2019, along with delayed long-term contracts for the supply of potash fertilisers to India resulted in lower potash prices compared to those in early 2019.
Given the market environment and with the aim of scheduled shutdown repairs at production facilities, Uralkali reduced the output of its main products in the second half of 2019, fully in line with the Company’s strategy to correlate the production of potassium chloride with prices and demand in key consumer markets.
The situation in the potash industry in the reporting period did not adversely affect Uralkali’s access to long-term external financing. The Company not only entered into an agreement with 13 international banks to raise the largest syndicated and first dualcurrency loan in its history with tranches of USD 725 million and EUR 650 million, but also successfully placed five-year Eurobonds totalling USD 500 million. Considering the high level of demand from investors, the coupon rate was set at 4% per annum.
Against this background, we continue to optimise our loan portfolio and conscientiously and timely discharge our obligations under existing loan agreements. Therefore, Uralkali’s net debt, as of 2019 year-end, dropped to USD 4,837 million compared to USD 4,887 million a year earlier, while the net debt/ EBITDA ratio was 3.07x versus 3.35x, respectively.
Doing business in a socially responsible way is without a doubt one of the global trends of the current decade. Being one of the largest tax residents and employers in the region, we are fully aware that our activities have a significant impact on many societal aspects, including social, economic and environmental ones. Given these factors, the Company is committed to providing stakeholders with the most objective and transparent information on its operations and prospects in the field of sustainable development and in integrating the ESG methodology into the corporate business strategy.
The issue of global food security is still relevant. Despite the current weakening of the industry, key global producers and consumers of mineral fertilisers understand the overall importance and need to ensure the financial and economic stability of agricultural production, which is why, in the medium and long term, we remain confident in the fundamental industry characteristics and actively invest in the Company’s development.
As part of the strategy approved by the shareholders, Uralkali is developing Shaft 4 at Solikamsk-3 and is running projects to build the new Solikamsk-2 and Ust-Yayva mines.
In this regard, I would like to thank all stakeholders for their trust and note that Uralkali will continue to contribute to the solution of the food security problem, efficiently and responsibly developing unique potash deposits and ensuring the social and economic development of the regions where it operates, the Company’s investment appeal and the well-being of its employees.
In addition to the trends described above, an epidemic of the coronavirus disease COVID-19 started in China in December 2019, and developed into a pandemic around the world. COVID-19 is now spreading around many countries creating a paralysis and many significant economic impacts. This pandemic may have a dramatic impact on many industries in these countries. We hope that the impact of COVID-19 on agricultural and distribution systems to deliver mineral fertilizers will be limited, since food is a basic industry, which provides security and stability for countries’ well-being.
Taking into account an extremely fast development of the situation and extraordinary measures taking by different countries, financial authorities and legislative bodies around the world we have yet to assess financial impact from coronavirus on our business and businesses of our subcontractors, distributors and final consumers of mineral fertilizers.